Tuesday, 20 September 2016

The Federal Government has concluded arrangements to sell the nation’s critical assets in order to raise $15 billion to rescue the country out of economic recession.

Minister of Budget and National Planning, Senator Udoma Udo Udoma, disclosed this at a cabinet retreat hosted at the presidential villa, Abuja.

New Telegraph investigations revealed that some of the assets being considered for sale are government shares in Joint Venture Companies (JVCs) and the Nigeria Liquefied Natural Gas (NLNG).

The national assets to be sold include the four refineries in Kaduna, Wari, and Port Harcourt as well as some aircraft in the presidential fleet. Speaking at the justconcluded cabinet retreat, Udoma in a document entitled “Turning a Crisis into an Opportunity: the Economy and the 2017 Budget,” obtained by New Telegraph yesterday, explained that the sale of government assets, Advance Payment for License renewals, infrastructure concessioning and use of recovered funds from corrupt officials were part of strategies put in place by government to bridge the huge funding gap. Our correspondent confirmed that the Presidential Air Fleet (PAF) contains 10 aircraft.

These are Boeing Business Jet (Boeing 737-800 or AirForce One), one Gulfstream 550, one Gulfstream V (Gulfstream 500), two Falcons 7X, one Hawker Sidley 4000, two AgustaWestland AW 139 helicopters and two Agusta Westland AW 101 helicopters. Each of the two Falcon 7X jets was purchased in 2010 by the Federal Government for $51.1 million, while the Gulfstream 550 costs $53.3 million.

The Federal Government, through the Nigerian National Petroleum Corporation (NNPC), owns 49 per cent shares in NLNG Limited while Shell Gas B.V. owns 25.6 per cent, Total LNG Nigeria Ltd owns 15 per cent and Eni International owns 10.4 per cent. In the four refineries in Warri, Port Harcourt and Kaduna, the Federal Government has 100 per cent stake, which is up for sale.

The government has, since 1999 when the country returned to democracy, expended N264 billion on maintenance of the four refineries. In spite of billions claimed to have been spent by the NNPC over the last 16 years on Turn Around Maintenance (TAM), the country’s refineries have remained in comatose.

The four refineries located in Port Harcourt (two), Warri and Kaduna have a combined capacity to refine 445,000 barrels of crude per day. The Senate yesterday threw its weight behind the Federal Government in the planned sales of the national assets. Senate President Bukola Saraki, at a plenary, urged President Muhammadu Buhari to sell some important national assets as part of efforts to boost the country’s dwindling foreign reserves.

According to Saraki, “The executive must raise capital from asset sales and other sources to shore up foreign reserves. This will calm investors, discourage currency speculation and stabilise the economy.

“The measures should include part sale of NLNG Holdings; reduction of government’s share in upstream oil joint venture operations; sale of government stake in financial institutions e.g. Africa Finance Corporation; and the privatization and concession of major/regional airports and refineries.”

Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, and Africa’s richest man, Aliko Dangote,have expressed support for the sale of the national assets.

Emefiele said the best option open to government is to sell the assets. “In the short run, we can sell assets… before the government came on board, I had opined that there was need for the government to scale down or sell off some of its investments in oil and gas, particularly in the NNPC and NLNG as at that time when the price of oil was around $50-$55 per barrel.

“We actually commissioned some consultants that conducted the study and, at the end of that study, we were told that if we sold 10% to 15% of our holding in the oil and gas sector, we could realise up to $40 billion,” the CBN governor said at the weekend.

At the weekend, Africa’s richest man, Aliko Dangote, specifically told the Federal Government to sell its stake in the NLNG, to beef up foreign reserves.

A communique issued at the end of the ministe-rial retreat indicate that the Budget and National Planning Minister had explained that “government was working hard to resolve the militant disruptions in the Niger Delta, and, in addition, a fiscal stimulus strategy was being developed involving, amongst other things, a plan to generate and inject large amount of funds, principally in foreign currency, estimated at $10 – $15 billion into the economy through Asset Sales, Advance Payment for License renewals, infrastructure.”

The Federal Government intends to achieve the sale of the assets through introduction of measures, including presidential orders that could fast track transaction processes. Buhari is expected to send to the leadership of the Senate soon an Emergency Economic Recovery Bill (EERB) that will take care of some of the challenges that are likely to thwart the sale process.

“Government was also planning to introduce measures for fast-tracking procedures so as to speed up the processes for getting these funds into the economy. Some of these will be achieved by Presidential Orders and Directives. “In addition, an Emergency Economic Recovery Bill is also being prepared for submission to the National Assembly to deal with those changes requiring legislation,” Udoma said.

The key resolutions, according to the communiqué issued at the end of the retreat and obtained yesterday by New Telegraph, are: (i) The programme of action for dealing with the recession and the current effort of government in developing an Economic Emergency Recovery Bill to address the situation, as well as the plan to bridge the funding gap was endorsed by participants; (ii) The need to prioritise capital spending in the 2017 budget in the area of infrastructure development, agriculture and social intervention; (iii) The retreat participants agreed on 2-3 quick-win areas to be implemented before the end of 2016 and six priority/ programme project areas for the 2017 Budget.

The quick wins agreed on are: (i) Immediate implementation of the social intervention programmes (School Feeding, N-Power; Science, Technology, Engineering and Mathematics (STEM) scheme; Conditional Cash Transfer (CCT), etc.; (ii) Effective communication of government projects, programmes and policies to the citizens will go a long way in mobilising support for government to succeed; (iii) Local debt repayment, including debt owed states and contractors to stimulate spending.

Meanwhile, government has confirmed that the 2016 Budget poor performance is reflective of the low revenue out-turns attributable to the global and domestic developments earlier highlighted.

“Oil revenues fell significantly in the second quarter compared to the first quarter as a result of increased oil pipeline vandalism and production shut-ins.

“Non-oil revenues also declined due to the acute shortage of foreign exchange,” Udoma said. The minister said that the failure to diversify the economy and implement the national goals due to lack of discipline in the past had made the country witness negative growth. Udoma said the major factor responsible for the recession was the overdependence of the economy on revenues from a single commodity, petroleum.

According to him, revenue source is not sustainable since the country doesn’t control the price of crude oil.

He said unsustainable structure was characterised by some indices, including “oil sector less than nine per cent of Gross Domestic Product (GDP), but about 80 per cent of government revenue and 95 per cent of Forex.” Other indices are “nonoil sector about 90 per cent of GDP (of which 52 per cent was indirectly dependent on oil) but less than 20 per cent of government revenue.

According to him, another index is declining capital expenditure with rising recurrent expenditure (2015 about 10 per cent capital) and import dependent consumption growth model with stagnant growth in investment to GDP.